Canna-Biz

How an uneasy legislative détente has created a smokin' medical marijuana industry in Colorado

L'Aura MontgomeryPut this in your pipe and smoke it: Plenty of variety for different ailments.

L'Aura MontgomeryDouble Doosy Cookies and other sweet treats bring baking to a new high.

Running a successful, growing business makes Boulder's Jill Leigh a
busy woman. While talking to a reporter in her ashen-blue office one
summer afternoon, an employee comes in and hands her a thick stack of
mail, saying there are two more boxes where that came from. Leigh opens
a few envelopes as the interview continues. Later, two other employees
enter her office seeking her expert opinion.

"Jill, what do you think this is?" asks one employee, holding a
fragrant, fist-sized nugget of marijuana. The grower had named it as
one strain, but the employees suspected otherwise.

"I think [the grower] got a Haze clone that was mislabeled," one of
the men says. Leigh inspects it for a moment and then agrees.

"I think it's probably Haze," she says. "Let's bottle it as that and
sell the product for $400."

The employees exit and Leigh turns: "I hate calling it product. I
never know what to call it. I don't like calling it medicine because
it's not Western medicine."

She puts her elbow on her desk and rests her chin in her hand. "It's
an herb. A very, very effective herb."

Leigh has two kids and an M.B.A. from the University of Denver. She
also sells high quality marijuana for a living.

Leigh and her husband own and operate Boulder County Caregivers, a
medical marijuana dispensary. The dispensary is one of more than 40
such operations that have sprung up in Colorado during the past year,
and more open each week, says Allen St. Pierre, executive director of
the National Organization for the Reform of Marijuana Laws (NORML).

Medical marijuana has been legal in Colorado since 2000, when
Amendment 20 passed with 53 percent of the vote. But for various
reasons, only in the past year have dispensaries emerged from
underground and started publicly advertising their wares.

Any use of marijuana is a federal offense. Though the state says
medical use of marijuana is legal, in this battle, federal law wins, as
a couple of Denver clinics experienced in unexpected dealings with the
FBI in August.

Overwhelmingly, though, the friction between federal and state law
has created more profit than problems. Medical marijuana is a booming
industry in Colorado, with enterprising men and women stepping in to
provide services physicians can't. Doctors can't prescribe marijuana,
and pharmacies can't stock it, so patients must either grow their own
or purchase it elsewhere. Doctors can't administer marijuana, so
patients often depend on their primary caregiver for advice on how to
use the herb. Many Colorado doctors fear federal reprisal for
recommending marijuana, so specialized clinics dedicated to helping
people become legal cardholders have opened their doors.

Thanks to the Obama administration's medically friendly statements,
as well as a recent major victory in a critical rule-making hearing,
dozens of businesses have sprung up in the past year to fill these
needs. The state may be in a recession, but Colorado's medical
marijuana industry is thriving.

Cannabis connoisseurs

No regulation from the state means that dispensaries can operate in
pretty much any way they please. At first glance, the brightly lit
waiting room in Boulder County Caregivers doesn't stand out from any
other medical waiting room. A friendly employee greets you as you
enter. An aquarium bubbles quietly in the corner. Cushy chairs surround
a coffee table filled with reading material.

There are differences, too. The sweet, skunky smell of marijuana
hits your nostrils as soon as you enter. The magazines feature glossy
photos of different marijuana strands on the cover, and a tray of spice
jars on the table offers samples of medical-grade with names like
Bubbleberry, AK-47 and the Cough. Just past the aquarium next to
Leigh's office, a separate room houses a display case showcasing
vaporizers, grinders and glass pipes presented in a fashion that, if
not for the flavored marijuana fudge selling for $4 a square, wouldn't
look out of place at an average head shop. Behind the counter sit more
than a dozen jars filled with different strands of marijuana, priced
from $275 to $420 for an ounce.

The cozy, cluttered spaces of the Apothecary in Longmont stand in
contrast to the spacious, sterile rooms of Boulder County Caregivers.
Larry Hill, the dispensary's owner, is currently remodeling a small
house into a waiting room and an office. For now, he sees patients in
the unit's pint-sized kitchen and stores his medicine in plastic bags
in a cupboard.

"The main thing my patients like about this place is that it's
comfortable," says Hill, an Ellijay, Ga., native who speaks with a
slight Southern accent. "My patients have never seen me in a suit and
tie, and they never will, unless they go to my funeral."

Hill spent many years in the Air Force, attaining the rank of Master
Sergeant before retiring and joining the Army National Guard of Alaska.
He smoked marijuana three times during the Vietnam War, he says, once
each while on leave in Hawaii, Thailand and Australia. He didn't smoke
it again until he was 55 and diagnosed with shingles.

"A friend introduced me to marijuana," he says. "It relieved the
pain and itching of the shingles, and that's when I started
smoking."

Last November, doctors diagnosed him with glaucoma. Marijuana helped
tremendously, but as a veteran, he gets his care through the Department
of Veterans Affairs.

"They can't even talk about marijuana at the VA, of course," Hill
says.

So he began growing his own. He harvested more marijuana than he
could legally possess, so he got rid of it by becoming a caregiver and
selling his excess to other patients. One thing led to another, he
says, and eventually the next logical step was to open his own
dispensary. He incorporated in February and now administers marijuana
to more than 40 patients. The medicine flies off his shelves as fast as
he can stock them.

As of June 30, 8,918 Colorado patients held valid licenses,
recommended by more than 800 doctors, with thousands more applying each
month. The actual number of patients might be double or triple that
thanks to an "affirmative defense" built into the amendment that allows
unlicensed patients to use medical use as a defense in court, says
Warren Edson, one of the lawyers that helped write the amendment back
in 2000. The majority of patients reside in Denver, Boulder, Jefferson,
El Paso and Larimer counties.

Room to grow

Amendment 20 allows patients registered with the state to possess up
to 2 ounces of usable marijuana and to grow up to six plants. Patients
can also choose to designate someone as a "primary caregiver" who can
grow or obtain marijuana for patients, which is how dispensaries
operate. Leigh and her husband, for example, are caregivers for more
than 300 patients.

Amendment 20 doesn't specify any alternatives for patients unwilling
to grow their own. As NORML's St. Pierre puts it, "It's like a magical
ounce appears."

Failing magic, a patient will designate a dispensary owner as his or
her primary caregiver, allowing the caregiver to possess 2 ounces and
grow six plants. If a caregiver has 10 patients, the number rises to 20
ounces and 60 plants. Amendment 20 makes possession, cultivation and
use legal, but it doesn't say whether a patient can buy marijuana from
someone else. Nothing in the law prevents caregivers from selling
marijuana to their patients, Edson says, and that's what allows
caregivers to operate for-profit dispensaries.

The amendment mandated that the governor choose a state registry to
maintain a medical marijuana database, and that responsibility fell to
the Colorado Department of Public Health and Environment. For years,
the CDPHE enforced an informal five-patient limit on caregivers,
denying caregivers from adding additional patients. That changed in
July 2007, when Sensible Colorado successfully sued the state and
convinced Denver District Judge Larry Naves to grant an injunction
temporarily removing the patient limit from caregivers.

At a board meeting last July, after hours of testimony in front of a
crowd that news reports said at times numbered more than 500, the board
made those changes permanent. Without a limit on the number of patients
they can serve, dispensaries have infinite room to grow. But without
regulation, St. Pierre says, dispensaries will go the way of every
other legal industry and fall victim to the basic economic laws of
supply and demand, which will weed out the poorly run businesses.

"At some point, Colorado will reach a carrying capacity," St. Pierre
says. "Wherever there's a Wal-Mart, there's probably going to be a
cannabis dispensary."

Some municipalities are starting to regulate dispensaries and are
setting their own rules on how they should be run. Edson, who provides
counsel to the majority of dispensaries in the state, advises his
clients to pay sales taxes.

"They're just like a GNC [store]," Edson says. "They're selling an
herbal supplement that's not tax-exempt."

Leigh says she pays more than $6,000 a month in sales taxes, plus
another $4,000 in other taxes. A sign in the display room above the
register in Boulder County Caregivers states in block letters the city
of Boulder sales tax rate, which is just above 8 percent.

"It's taxed just like echinacea," Leigh says.

Her dispensary is members-only, and a patient must assign it as his
or her primary caregiver to access its services.

"Dispensaries allow for patients to have a safe, comfortable
environment with an individual who sees them every day," Leigh says.
"An individual caregiver can't provide all those services."

She offers a delivery service as well, but surprisingly, she says,
that side of the business has been slow.

"I think it's because this is the highlight of so many of these
patients' weeks," she says.

Many of her patients with chronic illness don't have the energy to
leave their homes often, she says, and some of them suffer from mental
illness as a result of their conditions.

"I train [my employees] to take patients aside and talk to them for
a moment and show them someone cares," she says.

Her M.B.A. training, though, has taught her to fear and minimize
risk. She has security cameras, motion detectors and panic buttons
spread throughout her business. She's never had any trouble, but in the
aftermath of the June 16 robbery of another Boulder dispensary, she's
not taking any chances.

"I keep a low profile," she says.

20 questions

Boulder County law enforcement has for the most part stayed away
from medical marijuana dispensaries, in part because the amendment is
so unclear, says Cmdr. Tommy Sloan of the Boulder County Drug Task
Force.

"I wish the law had been a little better written and had a little
more guidance in there," he says. "This one is so vague."

Amendment 20's narrow wording raises a number of questions. Can a
patient or caregiver buy marijuana from the black market legally? Can a
caregiver purchase medicine from another caregiver? Can a caregiver
sell to another caregiver's patient or to a patient without a primary
caregiver? When asked what the drug task force's strategy was for
dealing with dispensaries, Sloan says they view medical dispensaries as
legitimate businesses.

"If we find out there is a dispensary in Boulder, we are not going
to get involved in the monitoring of them to make sure they are
operating within their bounds unless we get information otherwise,"
Sloan says. "We are not self-initiating investigations on them."

After apprehending the suspects in the June 16 robbery, police
returned two stolen 20-gallon barrels of marijuana to the
dispensary.

Sloan says another concern he has is a liability issue dealing with
growing marijuana plants. Should officers seize growing marijuana
plants if the owner says they are for medical use?

"One of the things in the statute is that we have to maintain the
care and custody of the plants," Sloan says. "What can happen is that
if we destroy their plants, and they end up winning the case [by
proving the plants were legally intended for medical use] and sue us,
we could owe them money."

On the federal level, the dynamic is markedly different. Caregivers
generally cast wary eyes toward the Drug Enforcement Administration.
For one thing, if a doctor recommends marijuana to a patient, that
doctor risks losing his or her DEA-granted prescriptive privileges. And
dispensary workers have heard enough about DEA raids on clinics in
California to worry about them here — even if United States
Attorney General Eric Holder has pledged a stop to raids on
dispensaries operating within the bounds of state law.

On Aug. 14, Denver's CannaMed clinic was among businesses the FBI
raided as part of a far-reaching theft investigation totally unrelated
to marijuana. According to media reports, while the feds were looking
through CannaMed's records, they took the opportunity to confiscate its
plants as well. And since another dispensary, called Alternative
Medicine of Southeast Denver, was in the same building, agents decided
to grab its marijuana, too. The raid cost AMSD thousands (though
reached by phone in late August, a representative said the dispensary
was fully restocked and serving its usual clientele about a week
later).

CannaMed — its mysterious legal issues aside — is
actually a little different from AMSD and other dispensaries in that
it's a specialty clinic. This type of business, also created by the
federal prohibition of medical marijuana, is devoted mostly to helping
patients get medical marijuana cards.

Darren Flagg, a personal trainer and competitive weightlifter who
once held a world record in powerlifting, co-owns South Boulder's
Grassroots Medical Clinic, another specialty clinic. He says he first
started using marijuana medically 16 years ago, and that a conversation
with a client of his spawned the idea for Grassroots. It opened in
May.

"My partner in the business had gone through [another clinic] and
had a pretty cold experience," Flagg says. "And so as we talked about
it at the training company I work at, we were talking about that whole
model. We decided to try and change things up a bit."

For $300, a patient gets three appointments at the clinic. By the
end of the third visit, the patient will have met separately with two
doctors who will decide whether to sign off on the state's medical
marijuana paperwork.

"Clinics have to be leery," Flagg says. "I don't want my doctors
rubber-stamping people, and they're not gonna. They're not going to put
their [medical] license on the line and risk having the medical board
scrutinize them and maybe take them out of good standing. We're trying
to make sure every patient who comes through is legit."

Not just a dealer

Some think the DPHE's actions warrant the sort of caution Flagg
takes.

"My view is that the state is trying to demonize doctors currently,"
says Brian Vicente, executive director of Sensible Colorado, a
pro-medical-marijuana advocacy group. "They have a history of being
disingenuous and using underhanded tactics to undermine this law."

Vicente pointed to a Public Health and Environment press release
dated July 30, which the department released in order to update the
marijuana registry statistics. The release put forth statistics showing
a sudden increase in the number of males younger than 30 applying for
medical marijuana cards. The press release also corrected the average
age of a cardholder, which the department had reported as 24. The
actual average age of a cardholder was 41.

"We are concerned about the number of young men diagnosed with
chronic severe debilitating pain, particularly the increasing numbers
we are seeing in 2009," Chief Medical Officer Ned Calonge said in the
release. "We are evaluating strategies that might allow us to assure
that physicians documenting a diagnosis of chronic or severe pain are
doing so within the standards of medical care."

In an Aug. 31 Denver Post story, Jim Martin, Public Health
and Environment executive director, sounded another alarm over the
"clustering" of registered patients. According to the story, 75 percent
of the thousands of registered patients received their recommendations
from one of just 15 doctors. While medical-marijuana advocates explain
this as unsurprising — a result of the small number of doctors
"specializing" in this alternative form of treatment — Martin
called it "a cause for concern."

Mark Salley, a department spokesman, has said the state is not
trying to discourage doctors from writing medical marijuana
recommendations and says that the state does not have the resources to
provide that sort of oversight.

"The state is not at all interested in demonizing doctors. Marijuana
has been shown to be effective for patients with certain medical
conditions," Salley says. "We haven't really developed strategies to
[provide oversight on medical marijuana recommendations], and we don't
really have the resources to do so at this time."

In the future, 2008 and 2009 might become known as the wild gold
rush days of medical marijuana in Colorado, when a lack of regulation
spawned an explosive gray market with few rules and many players. The
business owners interviewed for this article agree that regulation of
some sort, whether on the city or state level, is inevitable. Leigh
even welcomes it, saying DEA rules hinder her efforts to ensure she
gets the highest quality product.

"I've called every independent lab in the state to test for mold,
mildew," she says, "but they won't because of DEA regulation."

And despite the specter of increased regulation, businesses are
planning expansions. Boulder County Caregivers will move into a much
larger office in October, and Leigh plans to make it an alternative
wellness center as well as a dispensary. Flagg sees Grassroots Medical
Center opening one or two more locations in the next year. Hill and a
partner will soon open a dispensary in the Colorado town of Craig.

But prospective expansion isn't what keeps Hill in the business.

"Contrary to popular belief," he says sarcastically, "I'm not just
the local pot dealer. This is a little more than a place to go get your
drugs. ... My budget is so close."

He struggles to find the right words, his face flushing with
emotion.

"A lot of my patients need personal contact with other people.
Especially my patients in wheelchairs. They don't have the kind of
personal contact that we take for granted," he finally says. "So I try
to take the time to give them some of that."

"That's Larry in a nutshell," an employee says from another room.
"That's all you need to know."

David Accomazzo writes for theBoulder
Weekly, where a version of this story first appeared.
Additional reporting for this version done by Kirk Woundy,Indymanaging editor.